As widely expected, the ECB Governing Council decided to leave key policy rates unchanged at today’s meeting. The main message of the Bank is unchanged from last month: the fragmentation of financial conditions is reducing and it should eventually translate, over the course of 2013, into some recovery in activity. The appreciation of the euro, if sustained, will be an additional factor of moderate inflation
As widely expected, the ECB Governing Council decided to leave key policy rates unchanged at today’s meeting. The decision was unanimous, as it was in January, although there has been “some discussion” among Council members.
The main message of the Bank is unchanged from last month: there are numerous signs that the fragmentation of financial conditions is reducing and it should eventually translate, over the course of 2013, into some stabilisation and recovery in confidence and activity.
In particular, the repayment of EUR 140.6bn out of the EUR 489.2bn obtained from the first LTRO is to be interpreted as an additional sign of improving conditions in financial markets. This sign adds to the decrease in yields and spreads on sovereign and banking securities, the narrowing of current account and Target2 imbalances, and the return of capital inflows in peripheral countries.
Mario Draghi insisted on the fact that ECB’s policy is still very accommodative according to the Governing Council. The full allotment mode of liquidity provision remains in place and the ECB judges that excess liquidity will remain well above EUR 200bn, even after repayments for the second LTRO have started.
Nearly half of the questions during the press conference related to the euro exchange rate, the other half to the liquidation of Anglo Irish Bank (AIB).
Note first that the appreciation of the euro exchange rate was included this month in the press conference introductory statement. It was quoted as a factor of downside risks to price developments, together with weaker than expected activity. During the Q&A session, Mario Draghi added that the nominal exchange rate was not a policy target of the ECB but that it was important for growth and price stability and that the bank will monitor whether its appreciation is sustained.
BY Frédérique CERISIER
To Read the Entire Report Please Click on the pdf File Below.
As widely expected, the ECB Governing Council decided to leave key policy rates unchanged at today’s meeting. The decision was unanimous, as it was in January, although there has been “some discussion” among Council members.
The main message of the Bank is unchanged from last month: there are numerous signs that the fragmentation of financial conditions is reducing and it should eventually translate, over the course of 2013, into some stabilisation and recovery in confidence and activity.
In particular, the repayment of EUR 140.6bn out of the EUR 489.2bn obtained from the first LTRO is to be interpreted as an additional sign of improving conditions in financial markets. This sign adds to the decrease in yields and spreads on sovereign and banking securities, the narrowing of current account and Target2 imbalances, and the return of capital inflows in peripheral countries.
Mario Draghi insisted on the fact that ECB’s policy is still very accommodative according to the Governing Council. The full allotment mode of liquidity provision remains in place and the ECB judges that excess liquidity will remain well above EUR 200bn, even after repayments for the second LTRO have started.
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Nearly half of the questions during the press conference related to the euro exchange rate, the other half to the liquidation of Anglo Irish Bank (AIB).
Note first that the appreciation of the euro exchange rate was included this month in the press conference introductory statement. It was quoted as a factor of downside risks to price developments, together with weaker than expected activity. During the Q&A session, Mario Draghi added that the nominal exchange rate was not a policy target of the ECB but that it was important for growth and price stability and that the bank will monitor whether its appreciation is sustained.
BY Frédérique CERISIER
To Read the Entire Report Please Click on the pdf File Below.
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